40 Thursday April 28 2022 | the times
Business
Lloyds Banking Group has warned of
the uncertainty facing Britain’s eco-
nomy from soaring inflation despite
posting a smaller than expected fall in
quarterly profits and raising its fore-
casts for the year.
The FTSE 100-listed bank said yes-
terday that pre-tax profit in the three
months to the end of March slid by
14 per cent from £1.9 billion a year ago
to £1.6 billion, which was better than
the £1.4 billion that had been expected
by City analysts.
It took a £177 million impairment
during the quarter for an expected rise
in bad loans, with part of the charge
driven by the risks posed by rampant in-
flation, which is fuelling a cost of living
crisis for British households.
Yet the lender was nevertheless up-
beat about its prospects for the rest of
the year. It lifted its guidance for both its
banking net interest margin, which is
the difference between what it pays for
deposits and what it earns from loans,
and its return on tangible equity, a key
measure of profitability. Investors re-
sponded by sending its shares up as
much as 2.9 per cent before the stock
lost ground to close down 0.25 per cent
at 45¾p.
Lloyds is Britain’s biggest domestic
lender and its closely watched results
are considered a gauge for the country’s
economic health. The high street bank
is behind brands including Halifax and
Bank of Scotland and has been led since
last August by Charlie Nunn, who was
poached from HSBC.
Nunn said that the “outlook for the
UK economy remains uncertain, par-
ticularly with regards to the persistency
and impact of higher inflation”.
Even so, William Chalmers, the fi-
nance chief, indicated that manage-
ment believed the group was well-
T
he group behind the
London stock market will
take a £60 million revenue
hit this year from its
crackdown on Russia-
related business (Patrick Hosking
writes).
London Stock Exchange Group
gave the estimate as it reported
good growth across all its divisions
in the first quarter and said that it
was on track to meet all targets forintegrating its $27 billion
acquisition, Refinitiv.
After the Russian invasion of
Ukraine, the stock exchange group
stopped trading in most Russian
companies listed in London and
also suspended all products and
services to clients in Russia.
The £60 million of lost business
accounts for just under 1 per cent of
annual group revenues.
First quarter total revenue was upExchange
loses £60m
from Russia
crackdown
Lloyds fares
well in face
of inflation
placed to weather the storm, saying
that the impairment the bank had
taken was “a pretty low amount relative
to our lending assets”.
He added: “Clearly we are likely to
enter into a slightly tougher environ-
ment so it will be natural to expect im-
pairments to tick up a little bit off the
back of that but importantly they are
starting from low levels.”
He said the bank was already seeing
“one or two signs of customers re-
sponding to the inflationary environ-
ment”, including subscriptions to
streaming services and gym member-
ships being cancelled.
Chalmers said: “We remain vigilant,
we also remain absolutely focused on
supporting our customers.”
The stock market had expected
Lloyds to report a fall in profits after its
earnings were boosted a year earlier by
its decision to release reserves that it
had amassed during the early stages of
the pandemic in 2020, when banks had
feared a wave of bad loans.
Yet the group was buoyed in the past
three months by interest rate rises by
the Bank of England, which is trying to
rein in inflation. This helped to drive
deposits at Lloyds up by 4 per cent year
on year to £481.1 billion, a cheap source
of funding for Britain’s biggest mort-
gage provider. This in turn helped its
net interest margin rise to 268 basis
points by the end of the quarter, from
249 a year earlier.
Lloyds said it now expected its net in-
terest margin for the year to be above
270 basis points, compared with its pre-
vious guidance of more than 260. It also
forecast that its return on tangible equi-
ty for this year would exceed 11 per cent,
up from about 10 per cent. Lending and
advances increased by 2 per cent to
£451.8 billion, while overall group reve-
nues advanced 12 per cent to £4.1 billion.
Tempus, page 44Ben Martin Banking Editor